Deck 5: Human Capital

Question 1

Why do mainly young people attend college?

A) Young people are further from retirement and thus have a higher expected return from college.
B) Young people face lower tuition costs.
C) Older individuals have jobs and would not be able to obtain better employment opportunities if they were better educated.
D) Older individuals have financial responsibilities and children they are unable to leave.
E) Younger individuals are smarter.

Answer 1

A

Question 2

Suppose there are two workers: individual A goes to college and individual B does not.What does this imply?

A) Individual A faces a higher market interest rate.
B) Individual A faces a lower market interest rate.
C) Individual A faces a higher reservation schooling cost.
D) Individual A faces a higher marginal return to schooling.
E) Individual A faces a lower marginal return to schooling.

Answer 2

D

Question 3

Suppose there is another worker in the economy,whose schooling and earnings are governed by w = 6.3 ln (1 + s).This worker will accumulate years of school and is of ability. Hint: in this case,MW(s)= 6.3/(1 + s)

A) more,higher
B) more,lower
C) less,higher
D) less,lower
E) the same,equal

Answer 3

A

Question 4

What is the individual's optimal level of schooling?

A) 2 years
B) 3 years
C) 4 years
D) 5 years
E) 6 years

Question 5

Which of the following would cause Brian to be willing to pay more to go to college?

A) His expected wage after graduation decreases to $110K.
B) His wage at the retail store increases to $6K.
C) His discount rate increases to 15%.
D) His discount rate decreases to 8%.
E) His wage during college increases to $30K.

Question 6

Suppose at any given time 7 of 16 workers are unemployed.What is the unemployment rate?

A) 7%
B) 16%
C) 44%
D) 56%
E) 73%

Question 7

What will be the (approximate)optimal level of schooling if the discount rate increases to r = 3.0?

A) 1 year
B) 2 years
C) 3 years
D) 4 years
E) 5 years

Question 8

Human capital includes all of the following except

A) learning how to use a new type of software.
B) obtaining an MBA to improve the possibility an individual gets a job in management.
C) moving from a rural area to a city where there are more jobs.
D) purchasing a new computer.
E) quitting smoking in order to improve a person's health.

Question 9

An individual will choose the optimal amount of schooling so that the return to an additional year of school equals:

A) the individual's total discounted earnings.
B) the marginal cost of an additional year of schooling.
C) the reservation schooling cost.
D) the expected return from investing the money in the bank.
E) B and D

Question 10

Sharon will invest in another year of school if one more year of school costs

A) $20
B) $26
C) $30
D) $50
E) all of the above

Question 11

How many years of schooling will Matt acquire?

A) 1 year
B) 2 years
C) 3 years
D) 4 years
E) 5 years

Question 12

Which of the following does not help develop human capital?

A) attending college for 4 years
B) the government investing in public schools
C) a firm purchases another computer so two individuals no longer have to share
D) a parent teaching their children about religion
E) a supervisor training a worker in how to use a new machine in the factory

Question 13

If capital markets are imperfect,high borrowing costs the acquisition of human capital but the rate of return.

A) encourage,increase
B) encourage,depress
C) remain the same,depress
D) discourage,increase
E) discourage,decrease

Question 14

Suppose a worker's earnings are governed by w = 8· ln (1 + s)and r = 0.5.Given the unemployment rate with 7 of 16 workers unemployed,what is the optimal level of schooling?

A) 4 years
B) 5 years
C) 6 years
D) 7 years
E) 9 years

Question 15

How many years of schooling does Carolina acquire?

A) 1 year
B) 2 years
C) 3 years
D) 4 years
E) 5 years

Question 16

The future earnings of an individual at a rate.

A) increase,constant
B) increase,increasing
C) increase,decreasing
D) decrease,constant
E) decrease,decreasing

Question 17

Which of the following would cause Brian to not be willing to pay as much to go to college?

A) His discount rate decreases to 5%.
B) His wage at the retail store increases to $10K.
C) His wage after graduation increases to $150K.
D) His wage at the retail store decreases to $10K.
E) both A and B

Question 18

What is Brian's reservation schooling cost?

A) $75K
B) $80K
C) $85K
D) $90K
E) $95K

Question 19

If capital markets are ,then higher educational investment by an individual's parents will the optimal level of schooling.

A) imperfect,decrease
B) imperfect,remain the same as
C) perfect,increase
D) perfect,decrease
E) perfect,remain the same as

Question 20

What is the marginal benefit of the investment for Sharon?

A) $20
B) $25
C) $35
D) $40
E) $50

Question 21

What do the answers to problems 19 and 20 imply about Carolina's and Matt's circumstances?

A) An additional dollar of investing in Matt's education has a higher rate of return than Carolina's.
B) An additional dollar of investing in Carolina's education has a higher rate of return than Matt's.
C) An additional dollar of investing in Matt's education has the same rate of return as Carolina's.
D) Matt has higher innate abilities.
E) Carolina has higher innate abilities.

Question 22

Which of the following is not a great labor market institution involved in accumulating human capital?

A) the government
B) the family
C) schools and college
D) the Internet
E) firms

Question 23

Which of the following will make an individual less likely to attend college?

A) a decrease in the interest rate
B) an increase in the wage paid to college educated students
C) an increase in the wage paid to individuals with a high school education
D) an increase in the number of years until retirement
E) an increased demand for skilled workers

Question 24

If the returns to schooling do not equal the interest rate,then

A) the market is operating efficiently.
B) individuals are not maximizing their utility.
C) firms are not maximizing their profits.
D) the market is in equilibrium.
E) the government can implement policies to increase overall wellbeing.

Question 25

If the average earnings of high school and college students declines,then the number of people attending college will:

A) increase.
B) decrease.
C) remain the same.
D) increase only among individuals with high natural abilities.
E) decrease only among individuals with high natural abilities.

Question 26

Which of the following is true about earnings and educational levels in the United States?

A) The median annual income of women is higher than men for all educational levels.
B) The highest percentage of unemployed workers have received some college training.
C) The highest percentage of unemployed workers have less than a high school education.
D) College enrollment has increased steadily for only men since 1960.
E) College enrollment has increased steadily for only women since 1960.

Question 27

According to the human-capital investment framework,

A) higher ability workers choose to invest more in human capital.
B) education increases productivity,which increases wages.
C) education does not affect productivity.
D) education affects wages by indicating a worker has more innate abilities.
E) workers who choose to attend college are not maximizing their expected lifetime earnings.

Question 28

Amanda is less likely to attend college if

A) she is older.
B) she expects to retire at an older age.
C) she values the future more than the present.
D) there is a low demand for college-educated workers.
E) she derives utility from attending classes.

Question 29

What is the net return to Carolina's educational investment?

A) 1
B) 3
C) 6
D) 7
E) 9

Question 30

If the net private return of return does not equal the social return to investment,then there exists a possibility for

A) arbitrage.
B) a Pareto improvement.
C) government intervention.
D) a private company to make a profit.
E) B and C

Question 31

Which of the following would not imply there is a spurious correlation between education and earnings?

A) Karen receives a higher wage than Daniel because Karen has more innate talent,not because she went to college.
B) A master's degree is required to become a librarian to signal to employers an individual is committed to this career.
C) Jason is a high ability worker and chooses to attend college because he enjoys learning.
D) After receiving an engineering degree,Calvin is more productive as an electrical engineer.
E) Frank's parents force him to go to college,after which he obtains a job that is unrelated to his degree.

Question 32

What is the net return to Matt's educational investment?

A) 1
B) 3
C) 6
D) 7
E) 9